## Stamp Duty Liability Under Periodic Tenancies

From May 2026, assured shorthold tenancies (ASTs) will be replaced by periodic tenancies under the Renters’ Rights Act. This change has inadvertently created a potential stamp duty land tax (SDLT) liability for tenants. According to the Financial Times, current tax rules require an SDLT calculation each year for indefinite or periodic tenancies, with tax becoming payable once cumulative rent payments reach £125,000.

For example, a group of students sharing a London property and paying £1,000 per month each could face a stamp duty bill of £573 after just one year, as their combined rent would total £96,000 annually. Although this is an illustrative case, it highlights how tenants could unexpectedly become liable for SDLT under the new tenancy arrangements.

## How Stamp Duty on Leases Works

Stamp duty on leases is charged at 1% of the net present value of rent exceeding the £125,000 threshold. While the amounts due are generally small, the administrative burden is significant. Tenants must calculate their liability and submit SDLT returns annually, a process that may be unfamiliar and complex for many renters.

The Financial Times estimates that around 150,000 private renting households could be affected within three years, increasing to 250,000 by 2031 as periodic tenancies continue. This growing scope means landlords and agents should be prepared to advise tenants accordingly.

## Filing Requirements and Penalties

Tenants will be required to file SDLT returns annually once their rent payments surpass the threshold. Failure to file on time incurs an automatic £100 penalty, rising to £200 after three months. However, for most tenants, reaching the £125,000 cumulative rent threshold will take several years. The average London tenant, for instance, would need approximately six years of continuous occupation before becoming liable.

## Government Response and Potential Solutions

A government official confirmed to the Financial Times that newly defined periodic tenancies could trigger SDLT liability but emphasised that the majority of private tenants would never reach the threshold. The official also noted that lease renewals following renegotiation reset the tenancy term, limiting exposure to SDLT.

The government is reportedly considering adjustments to accommodate the new tenancy system, with any changes likely to be announced in an upcoming Budget. One option under review is to delay SDLT filing and payment until the tax due reaches £5,000, effectively restricting liability to high-value properties after many years.

A government spokesperson told the Financial Times:
“The department is aware of the potential issue, and we are looking at how best to resolve [it]. It is not an immediate problem for any tenant. No one will be affected until the rent they are paying is worth more than £125,000 — which would take most tenants more than seven years.”

## What This Means for Landlords and Agents

While the immediate impact on most tenants is limited due to the high rent threshold and time required to reach it, landlords and letting agents should be aware of the potential administrative complexities periodic tenancies introduce. Advising tenants about their SDLT responsibilities and monitoring tenancy renewals may become necessary to avoid unexpected liabilities.

Landlords of high-value rental properties should particularly note the possibility of SDLT becoming payable after extended tenancies. Keeping informed of government announcements and budget updates will be important to understand any forthcoming changes to the current SDLT framework.

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Suggested internal link anchors

– Renters’ Rights Act
– assured shorthold tenancies
– stamp duty land tax
– periodic tenancies
– private rented sector
– tenancy renewals
– SDLT filing requirements
– rental property tax liabilities
– tenant administration responsibilities
– high-value rental properties
– government budget announcements
– private renting households

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TLA update

TLA is launching a new Trusted Partners Hub in Q1 2026, featuring verified and approved service providers selected to support landlords, tenants, and property management businesses. We are inviting legal, trades, insurance, financial, mortgage, tenant screening, and other service providers to register their interest here: https://landlordassociation.org.uk/become-a-tla-service-partner/